Innovation orientation: over 70% of companies continually engage in research ++ Research spending: increase in 2016 to the record level of 10.8 billion euros ++ Research promotion: VCI calls for additional fiscal incentives ++ Impact assessment of legislation: VCI speaks for introducing an innovation check.

In a comparison of industries, the chemical-pharmaceutical industry has the strongest orientation to innovation: Over 70% of companies are continuously engaged in research and development (R&D) – as compared with only 30% in German industry as a whole. This is shown by the latest research indicators presented by the German chemical industry association Verband der Chemischen Industrie (VCI). A record was achieved in R&D spending: With 10.8 billion euros, R&D budgets of German chemical-pharmaceutical companies were at a new record high in 2016 – for the sixth consecutive time.

Also chemical and pharma SMEs strongly contribute to this positive development: They dedicate some 5% of sales to innovation.

With 42,000 employees (2015) the number of staff in research laboratories remains at a high level.

But the encouraging development in the industry should not lead to the conclusion that all is well at the research location Germany, so the VCI. With globalisation and ever stronger competitive pressure, Thomas Wessel (chairman of the VCI committee for research, science and education) wants more steps to strengthen competitiveness: “Germany is a good location for turning ideas into innovations. But this country is not ranking at the very top in the international innovation competition. Here, we need a powerful push to catch up with the best.”

According to Wessel, it is thus a correct – albeit an ambitious – political goal to raise for the overall economy the share of R&D spending in GDP from 3.0 to 3.5%. For industry this means a major effort, because two thirds of the total funds needed for this purpose fall to its share. For example, the VCI states that the chemical-pharmaceutical industry would need to expand its R&D investment by roughly 20%. Taking the figures for 2016 as a basis, this industry would have to invest around 13 billion euros annually in research and development. Wessel underlines: “We will not reach the 3.5% target without extra incentives and without framework conditions that are conducive to innovation and investment.” He holds that the catch-up process should be facilitated by fiscal incentives for research, more support for life sciences, an innovation check in the impact assessment of legislation, more openness for new technologies and more money and staff for education in science, technology, engineering and mathematics (STEM).

Introduce fiscal incentives for research

Wessel considers fiscal incentives for R&D as one of the major drivers for more research in Germany. For this reason, he advocates a rapid introduction of such incentives, additionally to the well-proven promotion of projects. From his perspective, this is the only way to reach the ambitious 3.5% target and to enhance the innovation performance of companies. In his viewpoint, it is decisive to support companies of all sizes in their research work: “Otherwise, fiscal incentives for research cannot unfold their full potential.”

Support life sciences

Furthermore, the chairman of the VCI‘s research committee recommends more support for the life science industry. Germany is an established location for this industry where life science companies invest huge sums in the development of new active substances, the further development of existing medicines and in production. Wessel explains: “Unfortunately, there are shortcomings in the duration of approval procedures for modern medicines and plant protection products in this country. They simply need to become faster and better.”

Check the impacts of legislation on innovations

Wessel sees another warning signal: Over 60% of chemical and pharma companies find the regulatory obstacles in Germany higher than those in other countries. Therefore, the VCI speaks for an innovation check in the impact assessment of legislation. This would enable the legislator to examine whether e.g. implementation deadlines, changes to norms and standards or the implementation effort render the development of new products more difficult. This is expected to bring further impulses for investments in new products and processes.

Strengthen the openness for new technologies

The approach of society to new technologies is also of great importance to Wessel: “Instead of skepticism, we need a societal climate where the chances and risks of new technologies are assessed in a well-balanced manner. Otherwise, technical progress is hardly possible.” On the example of molecular biology methods for genome editing, politicians can show that Germany bets on the future and on technical progress. Wessel highlights the advantages of genome editing for R&D into medicines and crop varieties up to industrial biotechnology. For example, genome editing in medicine drives forward the decoding, preventing, treating and curing of diseases for which there are currently only limited therapeutic options or no therapies at all. Wessel stresses: “We should use these chances without neglecting potential risks. It would be bitter for the location Germany if we were once more left behind in a future-oriented technology.” Against this backdrop, he proposes a BioDialog modelled after the successful NanoDialog of the German federal government. Ethical issues about the risks of genome editing could be neutrally discussed with politicians and society within a BioDialog.

Germany needs more STEM education

“The future of the innovation location Germany is decided as early as in school – because STEM education creates the future”, so Wessel. After all, Germany needs excellently qualified scientists, engineers, technicians and skilled workers to further improve its high innovation performance. This presupposes an outstanding education system that has a focus on science subjects and stirs a passion for new things all the way from kindergarten to university. For this, schools and universities need more funding and staff.

Finally, Wessel urges all political parties to create new scope for R&D investment in the coming legislative period, so that Germany can remain a highly innovative country: “This is because innovations are the starter capital for our future.”

Please note:All material around VCI's press conference - 5 charts in diverse formats, the full statement by Thomas Wessel as well as a set of photos in high resolution - stands ready for you in the download section at the top of this page.

The VCI represents the politico-economic interests of around 1,700 German chemical companies and German subsidiaries of foreign businesses. For this purpose, the VCI is in contact with politicians, public authorities, other industries, science and media.The VCI stands for over 90 percent of the chemical industry in Germany. In 2016 the German chemical industry realised sales of around 185 billion euros and employed over 447,000 staff.